Fierce competition for homes in the Seattle area has brought back a practice that all but disappeared after the boom of the late 1980s: offers from buyers to beat any competing bid.
The return of “escalator clauses” reflects a real-estate market in which demand for new homes continues to outstrip supply.
The median price of $186,000 for a house or condominium in King County in February was up 12 percent from the $166,000 paid a year earlier, according to the Northwest Multiple Listing Service. And though more houses were put on the market than in February 1997, brisk sales reduced the total number of listings by 16 percent, from 7,119 to 5,936.
Brokers say demand for houses is fueled by low interest rates and new jobs that are attracting homeowners from other parts of the country.
Many competitively priced houses are drawing multiple offers at or above the asking price. Frequently, it’s the I’ll-beat-any-offer proposal that wins the bidding war, said Ken Bacon, managing broker in Windermere Real Estate’s Redmond office.
“The ones with the escalator clauses are the ones that are getting the houses,” he said.
An escalator clause commits a potential buyer to top any other offer–most often by $500–up to a limit set by the buyer. The seller must show a competing offer to escalate the bid.
The current seller’s market has led buyers to seek pre-approved credit, shorten the time to closing and, in some cases, drop contingencies such as a structural inspections.
Michael Waggoner, a managing broker for Coldwell Banker Bain, said escalator clauses are most often used when there are multiple bids for homes listed below $250,000.
But bidding wars have also taken place over more-valuable properties. And property values in some neighborhoods have risen far more steeply than the 12 percent King County median. A home on Hunters Hill off Union Hill Road in Redmond sold for $425,000 last year–and recently sold again for $125,000 more, Bacon said.
“We’re in a seller’s market in a big way,” said Coldwell Banker Bain General Manager Mike Grady.
Although some brokers refuse to use escalator clauses for fear of increasing the price beyond a home’s value, Grady estimated that about one-third of his firm’s transactions now involve the clauses.
In Snohomish County, the median price rose 5 percent in February while the number of homes for sale fell 17 percent.
The most expensive homes are on the east side (including southeastern Snohomish County), where the median closing price last month was $234,950, up from $214,600 a year earlier. Asking prices were highest on Mercer Island ($687,000) and in the area that includes Medina, Hunts Point and West Bellevue ($507,950).
